Trade War Comes to Louisville, Jack Daniels Takes Tariff Hit

Led by strong sales for its whiskey and tequila brands, Brown-Forman Corp. reported higher fourth-quarter net income Wednesday despite taking a hit from the Trump administration’s tariff fight.

The Louisville, Kentucky-based company — best known for its Jack Daniel’s Tennessee Whiskey brand — said tariff-related price adjustments shaved 1 percentage point off its full-year net sales growth.

But the company showed its resilience to the trade disputes by posting robust sales growth in emerging global markets. It also posted sales growth in the highly competitive U.S. market.

American whiskey producers face stiff retaliatory tariffs in the European Union, the industry’s biggest export market, as part of the Trump administration’s trade disputes. It’s a headache that’s continuing into the company’s new fiscal year.

Brown-Forman products account for a big share of the American whiskey business into Europe, said Lawson Whiting, the company’s president and CEO.

“So we view these tariffs really from the EU as a targeted campaign right at Brown-Forman, an American business headquartered in Kentucky,” Whiting said in a conference call with industry analysts.

The company said it’s assuming tariffs remain in place for all of the current fiscal year, compared to about seven months of tariff impact in the just-ended fiscal year. Brown-Forman’s earnings-per-share projection for the new fiscal year is in the range of $1.75 to $1.85.

American spirits producers hit by EU tariffs face the choice of either passing along the tax to European customers and risk losing market share, or absorbing tariff-related costs, which can mean smaller profits.

Brown-Forman chose to absorb the costs in most countries in the just-ended fiscal year to continue sales momentum, and it currently plans to continue doing so heading into the new fiscal year, said Jane Morreau, the company’s chief financial officer.

The strong dollar was another drag on Brown-Forman’s earnings, costing the company another 2 percentage points in its net sales growth during the recently ended fiscal year.

“We are certainly facing a few short-term challenges,” Morreau said. “That said, we believe that the dollar won’t stay strong forever. That rationale thought will prevail on tariffs, given they lead to numerous unintended, negative consequences, including higher costs for consumers.”

Foreign markets account for slightly more than half of Brown-Forman’s overall sales.

For the full fiscal year, underlying net sales in emerging markets grew 11%, compared to 13% a year ago, the company said. Mexico was a big growth driver, with underlying net sales up 11%, fueled by strong demand for its tequila brands. Those net sales surged by 25% in Brazil due to strong demand for Jack Daniel’s Tennessee Whiskey.

Underlying net sales in the U.S. grew 3%.

Those net sales increased by 4% in the company’s developed international markets, though the growth was suppressed by more than 1 point due to tariffs, it said.

Brown-Forman, like other large spirits companies, stockpiled inventories in bracing for the effects of tariffs imposed in the EU that targeted American whiskey and other U.S. products in response to Trump’s decision to impose tariffs on European steel and aluminum.

Brown-Forman reported net income of $159 million, or 33 cents per share, for the quarter ended April 30, which topped expectations by 3 cents. That’s compared to $110 million, or 23 cents per share, a year ago.

Fourth-quarter net sales were up 1% at $744 million, which was short of the $762 million that Wall Street had expected, according to a survey by FactSet.

For the full fiscal year, net income rose by 17% to $835 million, or $1.73 per share, and revenue was at $3.32 billion.

Among its brands, the entire Jack Daniel’s lineup had underlying net sales growth of 4% for the full fiscal year, the company said. It reported 22% underlying net sales growth for Woodford Reserve. Among its tequilas, Herradura and el Jimador both rose 13%.

In the latest sign of growth in its bourbon lineup, Woodford Reserve is on track to surpass 1 million cases sold in the new fiscal year. Old Forester, the company’s founding brand, surpassed 250,000 cases sold — the venerable brand’s highest volume level since 1994, Morreau said.